Asian investors chase long-dated Alibaba bonds for higher yields

American investors showed more interest in Alibaba Group Holding's short-dated debt but Asian buyers flocked into long-dated bonds, seeking higher absolute returns that match their minimum yield requirements.

Alibaba raised US$8 billion on Thursday in its first bond deal since its record-breaking initial public offering in New York in September.

It offered six different tranches after receiving US$55 billion in orders from yield-hungry investors around the world that showed a preference for fixed-rate over floating-rate debts.

Five of the six tranches were fixed-rate bonds, with the other a US$300 million three-year floating note.

The largest portions were two US$2.25 billion fixed-rate deals, yielding 2.5 per cent in a five-year maturity and 3.6 per cent in a 10-year maturity. The US 10-year treasury note yielded 2.33 per cent yesterday, after recovering from a sharp drop in the benchmark rate in the middle of last month.

"US fund mangers represent about half of the entire Alibaba deal," a source said. "They are tied to a five-year fixed-rate benchmark. In contrast, Asian investors such as the commercial banks and money managers are more keen on long-dated bonds such as the 10-year and 20-year tranches."